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College is Not Worth the Cost: Only 15% of Students Benefit from Attending College

why college is not worth the cost

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Many education experts conclude that college is a MUST for every child. But mounting evidence makes that advice hard to say with a straight face. By my analysis, at most, only 15% of students benefit from attending college.

For a shorthand economic explanation, some companies that don’t require a college degree offer starting salaries as high as $31,020. The average family spends $72,196 for a child’s college education (average cost of $26,226/year minus merit aid times four years). Meanwhile, the median entry-level salary for a college graduate has stayed steady at around $48,000. So families and graduates spend $192k ($72k for college, $120k in forfeited earnings) for a $17k bump in salary. Further, more and more college graduates are stuck in low-wage jobs, when they can find a job at all.

If you are not wealthy, you must weigh heavily your decision to go to college. Not only is college not worth the cost, but going to college could be the single worst financial decision of your life.

College Can Actually Decrease Your Market Value

Before you assume I’ve gone off the deep end by myself, let me start by saying Peter Cappelli, a professor at the University of Pennsylvania’s Wharton School, states in his book, Will College Pay Off?: A Guide to the Most Important Financial Decision You’ll Ever Make:
Looking at the actual return on the costs of attending college, careful analyses suggest that the payoff from many college programs — as much as one in four — is actually negative. Incredibly, the schools seem to add nothing to the market value of the students.
Rather than being a surefire hit, college might actually DECREASE your market value. Increasingly, people are finding that college degrees are worthless as there is a glut of supply of college graduates and not enough demand. But let’s get into the evidence.

Why We Erroneously Think College Makes People Successful

It’s true that college graduates tend to be more successful than non-graduates. But attending college did not cause success. Wealthy high-performing students tend to do better than poor low-performing students at life and the former group is also much more likely to attend college. The most salient difference between these groups is not college but wealth and ambition.

A college is like someone who bets on Tom Brady. Tom Brady doesn’t need the bettor to bet on him to succeed. Tom Brady will succeed either way and the bettor reaps the rewards. The same is true with colleges. Colleges bet on successes and take credit when they succeed. Just like picking Tom Brady, selective colleges don’t make long shot gambles. Colleges admit rich, smart, and talented students with proven track records. And if the students are long shots for success, colleges make them pay boatloads of money. Colleges win either way.

Colleges Pick Students Likely to Be Successful

Consider that children from the top half of the income distribution earn 77% of all bachelor’s degrees. As the New York Times provocatively points out, some colleges have more students from the top 1% than the bottom 60%. If your parents are multimillionaires, you’re going to be ok in life no matter what you do because of genetics and money.

And if college students aren’t wealthy, they’re smart and/or hard-working, as evidenced by applying to and being admitted to college. One study showed students who graduated from state schools but were accepted into the Ivy League earned as much as Ivy graduates. Even more interesting, students with comparable GPA/SAT scores rejected from Ivies earned as much as Ivy graduates. What does this tell us? These students had identifiable advantages (intelligence and motivation) when they were graduating from high school, as evidenced by application to Ivy League schools. Where they went to college did not make a difference.

30% of billionaires do NOT have a college degree. 20% of millionaires never went to college. Of course that means 70% of billionaires and 80% of millionaires did go to college. But that doesn’t mean you should. There are millions of college graduates who earn less than the non-degreed millionaires and billionaires.

Debunking the $1M College Premium

On purely economic terms, attending college is a suspect decision. – John Lounsbury, SeekingAlpha

The common refrain is that a college graduate will make $1M more than a high school graduate over a lifetime, according to a 2011 Georgetown study. A university “proving” that attending university is valuable? From the get-go, that’s a biased study.
Further, one million dollars over a lifetime isn’t an impressive number. Let’s say that instead of spending $80k on college today, you invest in the stock market for 44 years (a lifetime of work plus 4 years of college). You’d end up with $1.6M, assuming a 7% rate of return. You earn $1M more working over your lifetime, but if you didn’t go to college, you’d have $1.6M. How many people would go to college to earn $600k LESS over a lifetime than if they’d just let their money work for them? Even if the number was $2M, or $3M over a lifetime, wouldn’t it be better to have $1.6M guaranteed to start your career than give it to a college?

The $1M analysis also fails to account for 1) not graduating in 4 years; 2) progressive taxes; 3) present value dollars; and/or 4) high incomes based on graduate school (lawyers, doctors, CEOs) and NOT based on college.

Other studies show that high school graduates without college degrees end up with a higher net worth than college students, even if the high school graduate works as a janitor. It makes sense given that those who forego college earn money earlier and have no student loans. So there is no consensus that a college graduate will earn more.

Our Beliefs about College are Based on Outdated Data

When we talk about successful college graduates, we are looking at people who attended college decades ago. The $1M analysis, at best, show that 44 years ago (40 years plus 4 years of college) it made sense to enroll in college. Proving that a choice was smart in 1965 (the data came from 2009, and we assume 44 years of work) does not mean that choice makes any sense now. Things are different now.

As more and more people graduate from college, the value of a college degree dwindles. Currently, 33% of adults aged 25 or older have a college degree. This is a significant uptick from the 1960s, when only 8% of adults held a bachelor’s degree. We can’t use outdated data to prove the value of college. The cost of college is so high and the value of a degree so low, the investment is now very risky.

College Doesn’t Advance the Unprivileged

My argument that colleges provide little value could easily be refuted if underprivileged students reliably showed improved outcomes after graduation. Even if college were free, it’s a waste of time because it doesn’t help its students, particularly the poorest, least privileged ones.

College Doesn’t Teach Anything Useful

For most college graduates, it’s hard to remember what we learned in those expensive four (or five or six) years. Studies clearly show this lack of learning. A 2006 Department of Education study noted that 30% of 2-year college students and 30% of 4-year college students had basic or below-basic quantitative literacy skills.  Furthermore, the study noted that “[t]he average literacy of U.S. college students was generally the same regardless of how long students had been in college.”  Academically Adrift: Limited Learning on College Campuses notes that one study of college students showed 45% demonstrated no significant improvement during their first two years in a range of skills – including critical thinking, complex reasoning, and writing. 36% showed no gains over four years. In fact, the authors argue that college administrators and faculty view college’s main goal is socializing.

The End of College highlights the shortcomings of the traditional college model (some of which are cited here) and the emerging technology that will actually deliver the education students need to succeed in the modern world. If one wants education, there are many options online that are cheaper and more effective.

College Doesn’t Reduce Racial and Gender Wealth Gaps

Here’s a metric by which college could prove its value: by taking people who have known disadvantages and bringing them to parity.

Even on this score, college is found wanting. One study found that African-American college students are equally likely to get hired as whites who dropped out of high school. Black families headed by college graduates have a third less wealth than white families headed by high school dropouts. Women with a Bachelor’s degree earned as much as white men with some college but no degree. One might argue that disadvantaged groups still fare better with a college degree, but another study stated that race and gender are wild cards that can trump all levels of education as determining factors for earnings. Further, student loans are reliably cited as a problem that disproportionately hurts underprivileged students.

Colleges Don’t Help First Gen Students

Colleges don’t provide support for first generation, low-income students who often experience feelings of isolation and culture shock. Their outcomes after college aren’t great either. First-gen student households are likely to lag behind their non first gen cohort in income ($65,200 v. $100,900 respectively) and household wealth ($152,000 v. $244,500). First-gen students are much less likely to complete their Bachelor’s degrees than their non-first-gen counterparts (35% v. 43%). Here’s the most damning part of the first-gen college student report though:

For adults who do complete a bachelor’s degree, financial outcomes are strongly linked to parental educational attainment. The median household income for households headed by a first-generation college graduate ($99,600) is substantially lower than the income for households headed by a second-generation graduate ($135,800).

If college were beneficial, there shouldn’t be big differences between graduates who have college-educated parents and those who do not. Instead, financial outcomes are linked strongly to one’s parents’ educations, and likely their wealth. College is merely entrenching existing biases and advantages.

The “Right Choices” Do Not Make College Worth It

Everyone knows a college graduate who is swimming in student loans without any job offers. These students typically get blamed for making the wrong choices. “You should have picked a better major.” “You should have attended a different college.” The argument goes “college is still a good investment so long as you do [whatever things worked for the advice giver].” I think this is a bad argument for three reasons.

One, any reason why college was not a good investment for a particular graduate means my argument is correct. My  point is that college is not a good investment for many people. This is just another data point on my side.

Two, an investment with deadly traps is not a good investment. It’s incongruous to say “He’s a good financial advisor. . . but a lot of his investments go bad.” We are paying colleges to provide guidance to our students.  If colleges are guiding our students wrong, that’s the college messing up, not the student.

Three, the statement isn’t even true that certain colleges and certain majors are good investments.

Majoring in STEM Does Not Make College Worth It

The constant refrain is that if college graduates majored in STEM, then college would pay off. First, 80% of college graduates major in non-STEM majors. If you think non-STEM majors are a waste, then you are effectively agreeing with me that the vast majority of people do not benefit from college. Second, if everyone became an engineer, salaries would go down (economics majors can explain that to us).

Third, not everyone has the capability or desire to major in STEM. The reason why some professions earn more money than others is because of unique skill sets and limited supply. If you force people into subjects for which they have no aptitude or interest, lots of students won’t be able to graduate or excel. Also, we need people in the workforce other than STEM workers. Everyone deserves to have an education and to use their talents in quality work.

Finally, even if you major in STEM, success is not guaranteed. STEM graduates, like other college graduates, are finding stagnant wages and stiff competition for jobs. 74% of STEM graduates did not have employment in a STEM job. Nearly 1 in 5 engineering majors were underemployed even five years after graduating. Over the next decade, it’s projected that there will be three new degree holders for every two new high-tech jobs. In a decade, people will be telling us it was our own fault for majoring in STEM!

Colleges Don’t Care if Students Get a Return on their Investment

It’s obvious that colleges don’t care about student outcomes once they graduate. What was less clear was how little colleges cared about their students while they were still paying tuition.  During COVID, dissatisfied students started withholding payments until tuition was reduced due to the shortened academic years and primarily online education. As one student striker noted:

If the university truly needs our tuition, this will be a big blow and they will be forced to lower tuition. If this isn’t a big blow, then it proves what we’ve been saying — they have a huge fundraising arm, and if this doesn’t affect them, they can afford to reduce tuition.

The colleges were unmoved. Tuitions were not lowered at the majority of colleges.

During Covid, colleges unceremoniously kicked students out of their dorm rooms – rooms that these students paid for in advance. This forced students, who may have contracted coronavirus over spring break, to make quick travel arrangements home, likely infecting themselves and the rest of the nation. It’s not that the colleges cared about their students’ safety – they just wanted to avoid liability.
Even with billions in endowment funds, college students were forced to figure their way home by themselves. College students and alumni raised money to help.
During COVID, UC-Berkeley even prohibited students from leaving their dorm room – even for exercise. The Freshman 15 phenomenon is emblematic of how unhealthy colleges are for its students.

College Steers Students to Miserable Career Paths

Everything I’ve written about college so far has been about earning potential. But there is more to a career than just your starting salary. A career is about finding work that you’re good at, that you’re passionate about, and that you’re excited to keep learning and growing in.

In terms of incentives, colleges are keen to funnel their students into prestigious, high-paying jobs – the next generation of investment bankers and consultants. If colleges are going to have such a high price tag, people are keen to see some return on investment. Colleges are poor at accomplishing this metric, but I should also point out it’s a lousy metric.

Ok so you make a good income. But are you fulfilled? Are you making a difference? Those seem like stupid questions, but the people who attend college are the brightest and most advantaged students among us. The rest of us benefit when our best and brightest are solving the world’s problems – not just the richest people’s problems. College could serve a social goal of igniting this passion toward public service but instead it directs these bright students into serving themselves. And we are all the poorer for it.

College limits what you perceive to be your options to investment banker, doctor, consultant and lawyer. And surprise, surprise, these professions are some of the most miserable. Instead, Smart People Should Build Things.

The High Cost of College Crowds Out Creativity and Learning

Students are incentivized to only choose courses that fulfill a graduation requirement, or that would look good on a transcript. This incentive rules out taking random courses for the fun of learning.  You aren’t taking Portuguese, or calligraphy, or underwater basket weaving at $55k a year. And that’s a shame, because if you took a cheap online option, of course you would.

But the main problem with college is how it teaches its students a weird value system. At my college, becoming a tour guide was a very prestigious activity. This explained why my family hated our college tour – because the guides were all social climbers.

College is a ladder-climbing exercise. It elevates certain activities over others just for prestige, obfuscating passion in the process. It’s hard to justify following one’s passion when you’re investing so much money into college. But if you didn’t go to college, you wouldn’t feel bad traveling the world, starting a risky business endeavor, or just opting out. You can’t chase prestige that you don’t know or care about.

Who Should NOT Go to College: The 4 Types of Students Who Don’t Benefit From College

I’m so sick of people saying that college pays off when it clearly doesn’t for so many people. Let’s start with four types of students who do not benefit from going to college.

Students Who Are Exceptionally Bright or Wealthy Don’t Need College

In 2012, 71 percent of students graduating from four-year colleges had student loan debt. That 71% represents 1.3M people. Thus, approximately 1.8M people graduated in 2012.

The 29% of college students without loans (550,000 people) will be included in the group of people where college pays off, though they really shouldn’t be. They are destined to be successful, with or without college. These 29% are either rich or smart/talented enough to go to college without needing to borrow money. These people will likely do well with or without college because of their family wealth and their intelligence/hard worth ethic.

Think about celebrities who have gone to elite colleges that were already successful. People like Natalie Portman at Harvard, Emma Watson at Brown, Brooke Shields at Princeton. Think about famous offspring – Malia Obama and Jared Kushner at Harvard, Chelsea Clinton at Stanford, the Bush’s at Yale, JFK Jr. at Brown.

The elite colleges picked these people because of their or their parents’ accomplishments and connections. They didn’t become successful because of their colleges or their college performance. The colleges benefit from the celebrities, and in exchange, the celebrities feel “smart.” But come on, if these people never attended college, they would be fine.

Students Who Don’t Graduate Do Not Benefit From College

The 71% statistic above covers only those who are “graduating.” It does not cover those who don’t graduate. Only 41% of students graduate from a 4-year college within four years. If approximately 1.8M people graduated college in 2012, representing 41% of the people who entered college around 2008, that means 4.4M people were enrolled, and 2.6M did NOT graduate. Most of the non-graduates cite money as the reason for not being able to graduate. (See above, wealth is a significant indicator of success before, during, and after college).

One study shows that some college credit is associated with slightly higher wages (~$6,000 more) and employment. However, the highest salary increase occurs between high school graduate ($37,675 mean earnings) and earning 1-12 college credits ($43,732). Mean salary fell by $3,000 for those with more college credits ($40,315 for 13-60 credits and $41,576 for 61+ credits). So more education does not necessarily lead to more skills or a bigger salary.

You might point to outlier dropouts like Bill Gates or Mark Zuckerberg as successful dropouts, but that doesn’t disprove my point. Gates and Zuckerberg did not benefit from taking out student loans and would not have benefited from earning a college degree. If anything, Harvard should pay Gates and Zuckerberg for attending and making dropping out look so glamorous and profitable.

Students With a Lopsided Student Loan-to-Salary Ratio Do Not Benefit From College

So far, over 3.1M (550,000+2.6M) of 4.4M college students failed to benefit because they were destined to be successful or because they didn’t get a degree. That’s already 70% of the students who enter college. What about the last 1.3M? Here are some statistics to chew on.
  • 17% of those with student loans owe more than $50k (5% over $100k). Those people seem unlikely to do well, so encumbered by debt.
  • 43% of college graduates are underemployed in their first job, meaning they work at jobs that don’t require a bachelor’s degree.
  • In 2012, 44% of borrowers in 2007-08 took an undesirable job or a job outside their field due to education cost.
  • Based on projections, nearly 40% of borrowers may default on their student loans by 2023. Currently, 1 in 8 student loans is in default.
  • At 15% of 4-year private and public nonprofit schools, 15 percent of students earn less than $25,000 per year, even a decade after they first enrolled.  The data is worse for 2-year and for-profit schools.
  • 63% of college graduates who made less than $50,000/year say their degree was a bad deal.

These are the people for whom going to college may have put them in a financial hole for the rest of their lives. These are the cautionary tales. But let’s not count them out yet – maybe they’ll go to grad school!

Students Who Go to Graduate School Did Not Get Their High Earnings From College

Approximately 37% of college graduates obtain graduate degrees. Granted, one can only go to graduate school after obtaining a bachelor’s degree. Still, I want to figure out the value of a college degree, not a graduate degree.

Professional schools elevate college median salaries. Furthermore, many people attending graduate school may actually be a sign that the college degree was insufficient. Maybe if students had more opportunities, they would have found a different career that didn’t require graduate school. If you plan to go to graduate school, go to the cheapest college possible to cut down on debt.

The other factor would be that most people who go to graduate school come from wealthy backgrounds. In any case, this group is likely subsumed in another group in my analysis.

The Few Students Who Benefit from College

So let’s summarize. 44% took undesirable or out-of-field jobs. 40% are set to default. 43% are under- or unemployed. 37% went to graduate school, in part, because of the lack of opportunities from college.
Let’s be generous. On the low-end, that there is a lot of overlap of these data points.  Assume that approximately half of people who took out loans for college are not getting their money’s worth. For instance, someone with over $50,000 in debt who is underemployed is also likely to default and may also go to graduate school.

So after taking out the people who don’t benefit from college, there are 650,000 people left (half of 1.3M). The last group of people have low debt and found employment requiring a college degree at ok-paying jobs.

I’m not saying these people have dream jobs or are happy. They’re not necessarily rolling in the dough either. The college success stories are those with a degree-requiring job with a decent salary and an amount of debt that is not crippling. Yay success!

Only 15% of Students Benefit from Attending College – in a Chart

Remember that approximately 4.4M enroll in college. 58% get no benefit from college because they never graduate. 15% are worse off after college – because of their heavy loan burden and/or low job prospects. 12% would have done great even without college.  So that leaves the last 15% (and this is a HIGH estimate) or 650,000 students who are getting the advertised benefits of going to college.

I’ve summarized this article into the above chart. As you can see, I conclude that 15% of college students benefit from college, but 85% do not. And that 15% is giving the statistics a lot of benefit of the doubt.

Though it made total sense for me to go to college 20 years ago, it might not make sense for someone like me to make the same choices today. A lot changes in 20 years. Beware of people who use their own experiences from decades ago as evidence that college is a good investment today.

The Worst Case College Scenario is Much Worse than The Best Case Scenario is Good

Are you going to be in that 15% of successful college graduates (and do you want to be)? Would you pay $100,000 where that investment ruins your life 85% of the time? Would you even pay $1 for this? At this rate, maybe you’d be better off starting your own company. At the very least, you get some experience, and are unlikely to blow $70k/year for four years for the experience.
College is hardly a sure pathway to success. If you still don’t believe me, you can read one of the 8 million hits for “student loan horror stories.”

BEST case scenario, you COMPETE to work to earn a salary high enough to pay off your college loans (and you might not even like the job).

The worst case scenario is spending $100k+ to attend a college you’re embarrassed to name. You end up at a job you could have gotten straight out of high school because you did not learn any relevant job skills in college and are paying off your loans for the rest of your life.

Possible Alternatives to College

I know you’re going to say – college is a risk but there is no alternative. Actually there is. Because even if you end up in a coffee barista job after high school, at least you didn’t have to spend tens of thousands of dollars for that privilege. You could very well be in that same position with a college degree.

I believe you can succeed without college. Or at least you can take a few years off trying to. College will still be there after experimenting and traveling.

Mitigate the Opportunity Cost of Going to College: A Gap Year

The Uncollege movement has some ideas of life without college. The movement focuses on self-directed learning. Billionaire Peter Thiel offers a scholarship for bright students NOT to go to college. Give a smart kid some money, and they’ll probably end up better than a cog in the student loan machine.

More research is showing that nearly half of “good” high-income jobs are held by blue-collar workers, not requiring a college degree. Consider blue-collar jobs before considering college. Many offer on-the-job-training and stability – because people are always going to need plumbers.

Explore the World

It won’t cost them any extra if you take one year of their college savings and use it to:

  • start a business
  • support yourself in a job learning how to pay bills, cook, clean, etc.
  • travel and learn to speak a language fluently
  • try a risky career choice – like acting, music
  • take classes online; take more advanced courses if you decide to attend college

You could say, all you’ve lost is time, but you haven’t lost any time. For one, you can make up the year by taking more classes in college and graduate in three years. For the second part – you will know what it’s like to apply for a job and to support yourself. If you ultimately decide to attend college, you will have a better understanding of what skills you need. Also you will have more confidence and maturity, and you will have lots of stories to tell.

How to Make College More Affordable

If you can go to a top college without accruing a lot of debt, it will likely be an ok choice. For others, college and student loans are a calculated risk. It might pay off, but it could very well be a huge mistake.  One should consider every opportunity to save money such as:

  • Taking many AP courses in high school to qualify for college credit
  • Using free/online learning modules
  • Delaying college until you know what you want to study, and working and saving money in gap years
  • Applying for many scholarships and financial aid
  • Attending community college for your first 1-2 years and/or taking classes at the community college
  • Going to a cheaper college if you plan to go to graduate school
  • Working part-time in college (I knew a few people who worked full-time while maintaining a full course load as well)
  • Reducing expenses while in college (tips for reducing costs in law school apply here)
  • Graduating early

Conclusion- Why College is Not Worth the Cost

Whenever I read about someone in college, I hear about their low-budget ramen-loving lifestyle. But there is irony in scrimping on health while dropping hundreds of thousands on college.

People always say “I didn’t understand when I signed my student loan payments.” Yet most people understand costs. It’s not that students don’t understand money. Instead, they are lured by an industry telling them everything is ok. Let’s give clear guidance that college is often not worth the cost.

College can be a wonderful asset to your career and a fun and rewarding four years. Don’t get blinded by the fantasy and ignore the finances.  College is an expensive gamble and you should treat it as such. Personally, I don’t believe going to college is a good use of your time or money.

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